DOL Files for (Another) Stay in Fiduciary Litigation
The Labor Department has filed for a stay of proceedings in litigation challenging the fiduciary regulation.
“Here, a stay of proceedings would be the most efficient use of judicial resources,” the Labor Department noted, going on to state that the plaintiff in the case (Thrivent Financial for Lutherans) “…is not currently subject to the challenged provision. Nor—in light of the Department’s legal position and pending administrative process — is the challenged provision likely to become applicable to Plaintiff in the foreseeable future.”
The Labor Department goes on to suggest that rather than “resolving the pending summary judgment motion (or the intervention motion which amici have indicated they might file), the Court should stay the proceedings and set a schedule requiring the parties to submit a status report at 60-day intervals regarding whether a continued stay is appropriate” – going on to offer to provide the court with a proposed order to the effect of their motion, and to file the proposed order on the public docket.
It’s been less than two weeks since the Labor Department withdrew its cross-motion for summary judgment in the Thrivent case, noting its stance that it was no longer defending “the one regulatory provision challenged in this action — the application of Best Interest Contract (BIC) Exemption § II(f)(2) to arbitration agreements.” In that motion, the Labor Department had gone on to say that if the court chose not to stay the case, it wouldn’t oppose the court’s granting summary judgment to Thrivent, vacating the BICE as applied to arbitration agreements entered into by the financial firm, noting that since “circumstances have changed” and acknowledging that the Labor Department “no longer defends the arbitration-restricting condition, and therefore does not intend to enforce the provision. And unless Plaintiff amends its contracts to include the limitation, no mechanism for private enforcement of the provision is apparent.”
Ahead of that motion, Thrivent had, in response to the Labor Department’s motion in a separate litigation in the 5th Circuit involving the fiduciary regulation, written to Judge Susan Nelson, noting that the Labor Department’s pullback on its support for the Best Interest Contract’s (BIC) condition restricting class-action waivers essentially made their case. Last fall Thrivent Financial for Lutherans filed suit in the U.S. District Court for the District of Minnesota, claiming that the requirements of the Best Interest Contract Exemption (the BICE) would, “by its terms and in its effect, require Thrivent either to cease conducting certain business that is beneficial to its Members or to abandon its longstanding commitment to resolving Member disputes amicably and through private, one-on-one mediation and arbitration.” The case in the 5th Circuit remains active.
In February the Labor Department had asked for a stay of proceedings and the continuance of the scheduled March 3, 2017 summary judgment hearing, arguing that a stay was appropriate because the subject matter of this litigation may soon be substantially revised or even rescinded in the wake of President Trump’s Feb. 3, 2017 memorandum to the Secretary of Labor directing the Secretary to “examine the Fiduciary Duty Rule.” That motion was denied by Judge Susan Nelson who, in doing so, noted that “…considerations of fairness to the opposing party mandate a presumption in favor of denying a motion to stay.”